Ethics & Public Policy Center

The Sanders Repeal-and-Replace Plan

Give Vermont senator Bernie Sanders credit: He is consistent and has a clear political philosophy. He has championed single-payer health care in the United States throughout his long career, and he isn’t backing off that position now that he is running for the nation’s highest office.

Sanders’ support of single-payer has emerged as a major issue in the Democratic primary campaign because it creates a point of clear differentiation with his chief rival, former secretary of state Hillary Clinton. Sanders wants to sweep away today’s current insurance arrangements, including Obamacare, and replace them with a fully government-run insurance program, modeled on Medicare. Clinton opposes Sanders’s single-payer push, arguing that it jeopardizes the hard-fought gains of Obamacare. She proposes instead to “build upon” Obamacare, with a focus on implementing new price controls on pharmaceutical manufacturers.

There’s great irony in this emerging fault line in the Democratic primary. Sanders is now the most vocal proponent of a plan to repeal and replace Obamacare (Obamacare has been rarely mentioned by the GOP candidates, and only three have offered anything remotely close to a replacement plan). And he is running hard to the left of Clinton, whose plan for health-care reform in 1993 and 1994 failed largely because it was viewed by voters as too radical and disruptive.

Sanders seems likely to get the upper hand in this argument because his sentiments are much more in line with the current mood of rank-and-file Democrats.

One often overlooked point in the Obamacare debate has been the continued unease of many Democrats with the new law. Opinion polls show a sizeable portion of voters who identify themselves as Democrats are unhappy with Obamacare because it “did not go far enough.”

It is not hard to see why many in the party are disappointed with Obamacare. They have heard for decades that for-profit health-insurance companies play no useful role in the health system and in fact mainly act to avoid providing coverage to sick patients in order to minimize paying medical claims.

President Obama deployed much anti-insurance rhetoric in his push for the legislation, but what emerged out of the process did nothing to displace the central role of private insurance in U.S. health care. Obamacare imposed much new regulation on insurance plans, but it also required all Americans to enroll in private coverage or pay a new tax. In essence, Obamacare created a guaranteed customer base for private health-insurance companies.

And these plans are not proving to be as popular with customers as the president had hoped. Those with the very lowest incomes are getting large subsidies that essentially make it free for them to get insurance and access care. But for working people with modest incomes, Obamacare insurance has turned out to be a lousy deal, with high premiums for skimpy coverage. It is not uncommon for families with incomes around $40,000 or $50,000 per year to face $5,000 or $6,000 in out-of-pocket costs before they get anything back from their insurance coverage.

Sanders is tapping into the general unease with Obamacare among liberals by going back to the tried-and-true single-payer well. Many details of his plan are unspecified, but the basic idea is clear enough: He proposes a tax-financed health-care system, with all payments for medical services made by the federal government, or the states, and with the federal government setting prices for services much as it does in the Medicare program today.

Sanders is smart to make this a central point of his candidacy. His plan is straightforward and easy for him to communicate and for voters to understand. Opposition from Clinton makes her look like she is resisting efforts to secure a longstanding goal of her party.

Of course, on substantive grounds, the Sanders plan would be a disaster. Moving to single-payer in the U.S. would require massive new taxes that would stifle growth, and consolidating all power over the health system in the federal government would lead, in time, to second-rate health care for many millions of people. Democrats praise Medicare’s simplicity, but giving the Medicare bureaucracy the power to set prices for all medical services in the U.S. would lead to the misallocation of billions of dollars. The federal government has no good way to know what the proper price should be for the thousands of different services provided to patients, and thus would overpay for many while underpaying for many others. The result of applying this kind of mindless regulation system-wide would be impaired access to many needed services and the slow exodus of the nation’s best and brightest out of medicine and into other pursuits.

Sanders’s push for single-payer would also be a disaster politically for the Democrats, in the unlikely event he emerged as the party’s nominee. The Sanders plan will sell well in the Democratic primaries, but it would face a much tougher audience in a general election. As Sanders himself admits, his plan would require substantial new taxes, including on middle-class families, and the termination of employer coverage for 160 million people who get their insurance through their place of work. Single-payer is easy to explain and appeals to constituents who are inclined to trust the government to do everything well. But for the far larger slice of the electorate that is skeptical of government competence, and generally happy with the insurance they have today, the Sanders plan will look like a radical and imprudent experiment.

Republican opponents of Obamacare should be cheered by Sanders’s push for a single-payer plan. It makes it clear that Obamacare isn’t popular even among Democrats. It also sharpens the debate over the future of U.S. health care. Obamacare isn’t single-payer, but it is government-run health care that will likely end up in single-payer someday. By pushing single-payer now, Sanders makes it clear where Democrats want to go next, and thus also helps clarify why a credible, market-based alternative would be far preferable.